U.S. Stocks Rise to Highest Level Since 2007 on Earnings

Feb. 8 (Bloomberg) -- U.S. stocks rose, sending the
Standard & Poor’s 500 Index to the highest level since November
2007, as corporate earnings topped estimates and European
leaders reached a budget agreement.

Eight out of 10 groups in the S&P 500 rose as Apple Inc.
and Hewlett-Packard Co. advanced at least 1.4 percent, pacing
gains in technology stocks. LinkedIn Corp. surged 21 percent
after the online professional-networking service provider posted
earnings that beat estimates. US Airways Group dropped 2.4
percent as the boards of American Airlines parent AMR Corp. and
US Air were said to be prepared to vote on a merger Monday.

The S&P 500 rose 0.6 percent to 1,517.93. The benchmark
gauge rallied for a sixth straight week, its longest rally since
August. The Dow Jones Industrial Average added 48.92 points, or
0.4 percent, to 13,992.97 today.

“Confidence is emerging here,” James Paulsen, chief
investment strategist at Minneapolis, Minnesota-based Wells
Capital Management said in a television interview on “Bloomberg
Surveillance” with Tom Keene. His firm oversees $332 billion in
assets. “People are finally deciding that this looks more like
a sustainable recovery.”

The S&P 500 has rallied 6.4 percent in 2013 as U.S.
lawmakers reached a budget compromise and companies reported
better-than-estimated earnings. The benchmark equity gauge is
about 3 percent below its record high reached in October 2007.
The index erased a weekly decline today after being lower
earlier on renewed concerns about the euro-area debt crisis and
as European Central Bank President Mario Draghi said the euro’s
advance could hamper a recovery.

Northeast Storm

Nearly 5.6 billion shares changed hands on U.S. exchanges
today, or 9.5 percent below the three-month average, as the U.S.
Northeast prepared for a storm forecast to drop snow by the
foot. Exchanges in New York, which shut for two days in October
when superstorm Sandy battered the city, remained open all day
said they were ready to use backup systems if needed.

“It’s business as usual,” NYSE Euronext spokesman Richard
Adamonis said by phone. “We do also have our contingency plans
in place.”

About 75 percent of the 341 S&P 500 companies that released
results so far in the reporting season have exceeded profit
projections, and 67 percent have beaten sales estimates,
according to data compiled by Bloomberg.

European Union leaders agreed to a seven-year budget that
cuts spending for the first time, bowing to U.K. Prime Minister
David Cameron’s insistence on thrift. The deal was struck after
25 1/2 hours of talks in Brussels, according to a post on
Twitter by EU President Herman Van Rompuy today.

Trade Deficit

Data in the U.S. showed the trade deficit narrowed more
than forecast in December, led by record exports of petroleum
that gave the world’s largest economy a boost at the end of
2012. Inventories at U.S. wholesalers unexpectedly fell in
December for the first time in six months.

“The trend’s been up all year and I don’t see anything
changing that,” John Fox, a Cobleskill, New York-based fund
manager at Fenimore Asset Management, which manages about $1.5
billion, said by phone. “Earnings results continue to be good,
and stock prices are ultimately driven by corporate profits and
interest rates.”

Technology stocks rose the most out of 10 S&P 500 groups,
climbing 1 percent. Apple, the world’s most valuable company,
added $6.76 to $474.98, climbing for a second day after saying
yesterday its board and management are in active discussions to
return more cash to shareholders. Hewlett-Packard jumped 43
cents to $16.87 and led gains in the Dow.

Microchip Technology

Microchip Technology Inc. surged 7.2 percent to $36.39 for
the biggest gain in the S&P 500. The Chandler, Arizona-based
company posted third-quarter earnings and revenue that exceeded
analysts’ estimates.

LinkedIn climbed $26.39 to $150.48 after the company
reported an 81 percent jump in revenue to $303.6 million,
topping the average analyst estimate of $279.7 million. Profit
excluding some items was 35 cents a share, beating the average
19-cent projection.

US Airways dropped 36 cents to $14.75. Its board, along
with AMR Corp.’s, is prepared to vote on a merger on Feb. 11 as
executives and advisers work on final terms this weekend, people
familiar with the matter said.

Boeing Co. fell 1.1 percent to $76.56, the worst decline in
the Dow, after telling airlines expecting to receive new 787
Dreamliners in coming months that deliveries may be late as
regulators investigate overheating batteries that prompted the
model’s grounding worldwide.

McDonald’s Corp. added 0.3 percent to $94.87. The world’s
largest restaurant chain said sales in the U.S. increased 0.9
percent in January. Analysts projected a drop of 0.3 percent,
the average estimate compiled by Consensus Metrix. Sales in Asia
Pacific, the Middle East and Africa plunged 9.5 percent while
analysts anticipated a decline of 5.8 percent.

Activision Blizzard Inc. jumped 11 percent to $13.41. The
largest U.S. video-game maker more than tripled fourth-quarter
net income.

Primerica Inc. climbed 3.3 percent to $33.63. The life
insurer previously owned by Citigroup Inc. said fourth-quarter
profit climbed on a boost in policy sales.

Moody’s Corp. erased 7.7 percent to $43.37 even after
reporting fourth-quarter profit increased 66 percent. The owner
of the second-largest credit ratings firm has tumbled 22 percent
this week, the most since 2008, after the Justice Department
filed a lawsuit against its competitor S&P that claimed it
deliberately understated the risk of bonds comprised of
mortgages made to the least creditworthy borrowers.

Nuance Communications Inc. slumped 19 percent to $20.00.
The maker of speech-recognition software reported first-quarter
adjusted earnings of 35 cents a share, missing the average
analyst estimate by 1 cent. The Burlington, Massachusetts-based
company was cut to hold from buy at Craig-Hallum Capital Group
LP and Needham & Co.

The U.S. stock-market rally to an almost-record high has
left the S&P 500 trading at the most expensive level in 18
months. The price-earnings ratio for the U.S. equity benchmark
has increased 25 percent to almost 15 since October 2011,
according to data compiled by Bloomberg. That’s still about 10
percent cheaper than the average multiple of 16.6 from the past
decade.

“Stocks are fairly valued,” Donald Selkin, who helps
manage about $3 billion as chief market strategist at National
Securities Corp. in New York, said in a phone interview
yesterday. “As long as interest rates stay low, I don’t think
we’re going to get much multiple expansion.”